REG - Local Shopping REIT - Final Results <Origin Href="QuoteRef">LSR.L</Origin> - Part 3
12/12/2016 07:06
- Part 3: For the preceding part double click ID:nRSL5117Rb
being expensed through the Income Statement.
Trade and Other Receivables
Trade and other receivables are initially recognised at fair value and subsequently held at amortised cost less impairment.
Impairment is made where it is established that there is objective evidence that the Group will not be able to collect all
amounts due according to the original terms of the receivable. The impairment is recorded in the Income Statement.
Cash and Cash Equivalents
Cash and cash equivalents comprise cash balances and deposits held on call. Cash equivalents are short-term, highly liquid
investments with original maturities of three months or less.
Derivative Financial Instruments and Hedging
The Group has used derivative financial instruments such as interest rate swaps to economically hedge risks associated with
interest rate fluctuations. The Group does not hold or issue derivatives for trading purposes.
Such instruments are initially measured at fair value on the date on which a contract is entered into and are subsequently
re-measured at fair value. Financial derivatives are recognised as current and non-current based on the maturity profile of
the associated cash flows.
The Group has determined that the derivative financial instruments held did not qualify as effective for hedge accounting
under the criteria set out in IAS 39 and consequently any gains or losses arising from changes in their fair value are
taken to the Income Statement. In the future and on an ongoing basis if new derivative financial instruments are entered
into, the directors will review the derivative contracts to consider whether they qualify for hedge accounting.
During the year to 30 September 2016, all the outstanding interest rate swaps were paid down.
Financial Assets
Financial assets are impaired when there is objective evidence that the cash flows from the financial asset are reduced.
Trade and Other Payables
Trade and other payables are initially recognised at fair value and subsequently held at amortised cost less impairment.
Ordinary Share Capital
External costs directly attributable to the issue of new shares are shown in equity as a deduction from the proceeds.
Shares which have been repurchased are classified as treasury shares and shown in retained earnings. They are recognised at
the trade date for the amount of consideration paid, together with directly attributable costs. This is presented as a
deduction from total equity. Shares held by the Employee Benefit Trust are treated as being those of the Group until such
time as they are distributed to employees, when they are expensed in the profit and loss account.
The nominal value of shares cancelled has been taken to a capital redemption reserve.
Rental Income
Rental income from investment properties leased out under operating leases is recognised in the Income Statement on a
straight-line basis over the term of the lease. When the Group provides lease incentives to its tenants the cost of
incentives are recognised over the lease term, on a straight-line basis, as a reduction to income.
Other Income
Other income comprises administration fees charged on lease renewals.
Taxation
Corporation tax on the profit or loss for the year comprises current and deferred tax. Corporation tax is recognised in the
Income Statement except to the extent that it relates to items recognised directly in equity, in which case it is
recognised in equity.
As a REIT, the Group will be exempt from corporation tax on the profits and gains from its property investment business,
provided it continues to meet certain conditions. Non-qualifying profits and gains of the Group (the residual business)
continue to be subject to corporation tax. Therefore, current tax is the expected tax payable on the taxable income for the
year, using tax rates enacted or substantively enacted at the balance sheet date and any adjustment to tax payable in
respect of previous years. The REIT entry charge is expensed on the date of entry to the REIT regime. Deferred tax is
provided using the balance sheet liability method. Provision is made for temporary differences between the carrying amounts
of assets and liabilities in the financial statements for financial reporting purposes and the amounts used for taxation
purposes. Deferred income tax is calculated after taking into account any indexation allowances and capital losses on an
undiscounted basis. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the
carrying amount of assets and liabilities using tax rates enacted or substantially enacted at the balance sheet date.
Deferred tax assets are recognised only to the extent that it is probable that future profits will be available against
which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the
related tax benefit will be realised. Deferred tax assets and liabilities are only offset if there is a legally enforceable
right of set-off.
Pensions
The Company has no pension arrangements in operation.
Share-based Payments
Share based payments are recognised as an employee expense, with a corresponding increase in equity. The Group operated a
short-term incentive plan for employees and former employees who are currently engaged on delivering the Company's
strategy. Share awards issued under this plan vest during the year of grant based on the achievement of certain non-market
performance criteria.
Employee Benefit Trust
In 2007 the Group established an Employee Benefit Trust in connection with its various share based incentive schemes. The
Group either purchased its own shares directly or it funded the trust to acquire shares in the Company. Transactions of the
Employee Benefit Trust are treated as being those of the Company and are therefore reflected in the Group financial
statements
Use of Estimates and Judgements
To be able to prepare accounts according to generally accepted accounting principles, management must make estimates and
assumptions that affect the asset and liability items and revenue and expense amounts recorded in the financial statements.
These estimates are based on historical experience and various other assumptions that management and the Board of directors
believe are reasonable under the circumstances. The results of these considerations form the basis for making judgements
about the carrying value of assets and liabilities that are not readily available from other sources.
The areas requiring the use of estimates and judgements that may significantly impact the Group's earnings and financial
position include the estimation of: the fair value of investment properties, derivative financial instruments and trade
receivables.
The valuation basis of the Group's investment properties is set out above.
The valuation of derivative financial instruments are also areas where judgement has been exercised by the Board. These
assets and liabilities have been valued by the Group's bankers. These valuations have been relied upon by the Board.
The Group is required to assess whether there is sufficient objective evidence to require the impairment of individual
trade receivables. It does this through a regular review of arrears with consideration given to any specific circumstances
relating to the receivable.
Segmental reporting
IFRS 8 requires operating segments to be identified on the basis of internal reports that are regularly reported to the
chief operating decision maker to allocate resources to the segments and to assess their performance.
Since the strategy review in July 2013 the Group has identified one operation and one reporting segment which is reported
to the Board of directors on a quarterly basis. The Board of directors is considered to be the chief operating decision
maker.
Adoption of new and revised standards
In the current year, the Group has applied a number of amendments to IFRS that are mandatorily effective. Their adoption
has not had any material impact on the disclosures or on the amounts reported in these financial statements.
Standards not affecting the reported results or the financial position
At the date of authorisation of these financial statements, the following standards and interpretations which have not been
applied in these financial statements were in issue but not yet effective (and in some cases had not yet been adopted by
the EU):
• Annual improvements to IFRS 2012-2014 cycle
• IFRS 9 'Financial Instruments'
• IFRS 15 'Revenue from Contracts with Customers'
• IFRS 16 'Leases'
None of the above standards is expecting to have a material impact on the future financial statements of the Group.
2. Administrative Expenses
a) The following fees have been paid to the Group's Auditors:
2016 2015
£000 £000
Auditors' remuneration for audit services:
Audit of parent Company 33 33
Audit related assurance services 16 16
Statutory audit of subsidiaries 38 37
Auditors' remuneration for non-audit services:
Tax services 24 27
Other services supplied 9 7
The other services supplied related to a transaction which did not proceed.
b) Included in administrative expenses is directors' remuneration as disclosed in the Remuneration Report. The Company had
one employee during the year (engaged on a contract which terminated after the year end).
Directors' emoluments are disclosed separately in the Remuneration Report.
c) Share Awards
The total expense recognised in the income statement for employee and former employee share-based payments was £66,000.
d) Non-recurring items
IAS 1 (Revised) - "Presentation of financial statements" requires material items of income and expenditure to be disclosed
separately. The amounts are items which, in management's opinion, need to be disclosed by virtue of their size or incidence
in order for the user to obtain a proper understanding of the financial information. These amounts are considered to be
£nil (2015: £nil).
3. Net Financing Costs
2,016 2015
£000 £000
Interest receivable 25 18
Interest receivable excluding fair value movements 25 18
Fair value gains on derivative financial instruments (note 14) 2,294 1,728
Financing income 2,319 1,746
Bank loan interest (1,924) (3,937)
Amortisation of loan arrangement fees (117) (100)
Head rents treated as finance leases (34) (49)
Financing expenses excluding swap closing costs (2,075) (4,086)
Payments to close swaps (1,758) -
Financing expenses (3,833) (4,086)
Net financing costs (1,514) (2,340)
4. Taxation
2016 2015
£000 £000
Profit before tax 631 20
Corporation tax in the UK of 20% (2015: 20.5%) 126 4
Tax relief available from REIT status (184) (464)
Effects of:
Revaluation deficit and other non-deductible items 497 445
Deferred tax asset/(liability) not recognised (439) 15
Total tax - -
Factors that may affect future current and total tax charges
Reductions in the UK corporation tax rate from 23% to 21% (effective from 1 April 2014) and 20% (effective from 1 April
2015) were substantively enacted on 2 July 2013. Further reductions to 19% (effective 1 April 2017) and to 18% (effective
1 April 2020) were substantively enacted on 26 October 2015. This will reduce the company's future current tax charge
accordingly and reduce the deferred tax asset at 30 September (which has been calculated based on the rate of 20%
substantively enacted at the balance sheet date) by £0.24m. From 11 May 2007, the Group elected to join the UK REIT regime.
As a result, the Group will be exempt from corporation tax on the profits and gains from its property investment business
from this date, provided it continues to meet certain conditions. Non-qualifying profits and gains of the Group (the
residual business) continue to be subject to corporation tax. The directors consider that all the rental income post-11 May
2007 originates from the Group's tax exempt business.
Due to the availability of losses no provision for corporation tax has been made in these accounts. The deferred tax asset
not recognised relating to these losses can be carried forward indefinitely. It is not anticipated that sufficient profits
from the residual business will be generated in the foreseeable future to utilise the losses carried forward as the current
year losses will be adequate to cover foreseeable profits. The non-provided deferred tax asset at 30 September 2016 was
£2.31m (2015: £2.35m).
5. Investment Properties
Freehold Leasehold
Investment Investment
Properties Properties Total
£000 £000 £000
At 30 September 2014 68,763 17,438 86,201
Additions 376 31 407
Disposals (4,267) (883) (5,150)
Fair value adjustments (819) (819) (1,638)
Movement on Investment properties held for sale (428) 76 (352)
At 30 September 2015 63,625 15,843 79,468
Additions 188 22 210
Disposals (4,538) (580) (5,118)
Fair value adjustments (481) (592) (1,073)
Movement on Investment properties held for sale 540 258 798
At 30 September 2016 59,334 14,951 74,285
The investment properties have all been revalued to their fair value at 30 September 2016.
All rental income recognised in the Income Statement is generated by the investment properties held and all direct
operating expenses incurred resulted from investment properties that generated rental income.
A reconciliation of the portfolio valuation to the total value given in the Balance Sheet for investment properties is as
follows:
2016 2015
£000 £000
Portfolio valuation 75,308 81,196
Investment properties held for sale (1,590) (2,387)
Head leases treated as investment properties held under finance leases per IAS 17 567 659
Total per Balance Sheet 74,285 79,468
6 Trade and Other Receivables
2016 2015
£000 £000
Trade receivables 1,086 746
Other receivables 255 171
Prepayments 753 1,111
2,094 2,028
7. Cash
2016 2015
£000 £000
Cash in the Statement of Cash Flows 11,000 12,740
Included in bank balances are amounts held pending the next interest payment due in October 2016. Until the interest
payment has been deducted from these balances the cash is not available for use by the Group. At the year end the amount
held on such account was £2.513m (2015: £1.289m) with accruals for interest due of £0.326m (2015: £0.633m)
8. Interest Bearing Loans and Borrowings
2016 2015
£000 £000
Non-current liabilities
Secured bank loans 49,821 54,987
Loan arrangement fees (186) (299)
49,635 54,688
Current liabilities
Current portion of secured bank loans 907 1,001
All bank borrowings are secured by fixed charges over certain of the Group's property assets and floating charges over the
companies which own the assets charged.
Subsequent to the year end, in November 2016 the bank borrowings were extended. The main changes were a £7m cash payment of
loan balance, and an extension of the repayment date from April 2018 to December 2019.
For more information about the Group's exposure to interest rate risk, see note 18.
9. Trade and Other Payables
2016 2015
£000 £000
Trade payables 110 521
Other taxation and social security 180 225
Other payables 684 613
Accruals and deferred income 1,337 1,770
2,311 3,129
Other payables include rent deposits held in respect of commercial tenants of £0.459m (2015: £0.430m).
10. Leasing
Obligations Under Finance leases
Finance lease liabilities on head rents are payable as follows:
Minimum Lease Payment Interest Principal
£000 £000 £000
At 30 September 2014 4,727 (4,055) 672
Disposals (80) 67 (13)
(Payments)/charge (48) 48 -
At 30 September 2015 4,599 (3,940) 659
Disposals (470) 378 (92)
(Payments)/charge (34) 34 -
At 30 September 2016 4,095 (3,528) 567
In the above table, interest represents the difference between the carrying amount and the contractual liability/cash
flow.
All leases expire in more than five years.
11. Capital and Reserves
Share Capital
2016 2015
Ordinary 20p Shares Ordinary 20p Shares
Number Amount Number Amount
000s £000s 000s £000s
Allotted, called up and fully paid 91,670 18,334 91,670 18,334
Investment in Own Shares
At the year end, 9,164,017 shares were held in treasury (2015: 9,164,017).
Employee Benefit Trust
The number of shares held by the trustee of the Company's Employee Benefit Trust ("EBT"), LSR Trustee Limited at the year
end was 921,098 (2015: 1,096,545). During the year options over 305,447 shares (2015: Nil) vested to beneficiaries under
the Local Shopping REIT Plc Employee & Former Employee Incentive Scheme 2015. Following the vesting of these awards, the
EBT transferred 175,447 shares to beneficiaries.
Reserves
The value of shares issued to purchase Gilfin Property Holdings Limited in excess of their nominal value has been shown as
a separate reserve in accordance with the Companies Act 2006.
Capital Redemption Reserve
The capital redemption reserve arose in prior years on the cancellation of 8,822,920 Ordinary 20p Shares.
Calculation of Net Asset Value Per Share (NAV)
2016 2015
£000 £000
Net assets 35,549 34,852
2016 2015
Number Number
000s 000s
Allotted, called up and fully paid shares 91,670 91,670
Treasury shares (9,164) (9,164)
Number of shares 82,506 82,506
NAV per share 43p 42p
12. Dividends
No dividends were paid during the current and previous year.
13. Earnings Per Share
Basic Earnings Per Share
The calculation of basic earnings per share was based on the profit attributable to Ordinary Shareholders and a weighted
average number of Ordinary Shares outstanding, calculated as follows:
Profit Attributable to Ordinary Shares
2016 2015
£000 £000
Profit for the year 631 20
Profit on continuing operations for the year 631 20
Weighted Average Number of Ordinary Shares
2016 2015
Number Number
Issued Ordinary Shares at 1 October 91,670 91,670
Treasury shares (9,164) (9,164)
Weighted average number of Ordinary Shares at 30 September 82,506 82,506
Diluted Earnings Per Share
As shares held in the Employee Benefit Trust are entitled to dividends, these have been included in the weighted average
number of shares. There are no other potentially dilutive securities and therefore no difference between basic and diluted
earnings per share.
14. Derivative Financial Instruments
Derivative financial instruments held by the Group are interest rate swaps used to manage the Group's interest rate
exposure. These are shown in the Balance Sheet as follows:
At 30 September 2015 these derivative financial instruments did not qualify as effective swaps for hedge accounting under
the criteria set out in IAS 39. They were fully paid down during the year to 30 September 2016.
Movements Movements
Fair Value in Income Fair Value in Income Fair Value
2014 Statement 2015 Statement 2016
Non-current liabilities (1,634) 1,634 - -
Current liabilities (2,388) 94 (2,294) 2,294 -
Fair value (4,022) 1,728 (2,294) 2,294 -
A summary of the swaps and their maturity dates are as follows:
Notional value of swap Effective date Maturity date Rate payable Fair Value Movements Fair Value
on fixed leg 2015 in Income 2016
£000 % £000 Statement £000
20,178 16/07/2007 31/01/2017 4.85 (1,087) 1,087 -
22,500 30/04/2013 20/07/2016 5.05 (823) 823 -
10,500 30/04/2013 29/07/2016 5.05 (384) 384 -
(2,294) 2,294 -
The swaps were fully paid down during the current year.
The derivative financial instruments included in the above tables are stated at their fair value based on quotations from
the Group's bank.
More details of the Group's policy regarding the management of interest rate risk are given in note 15.
15. Financial Instruments and Risk Management
The Board of directors has overall responsibility for the establishment and oversight of the Group's risk management
framework.
As described in the Corporate Governance report, this responsibility has been assigned to the executive directors with
support and feedback from the Audit Committee. The Audit Committee oversees how management monitors compliance with the
Group's risk management policies and procedures and reviews the adequacy of the risk management framework in relation to
the risks faced by the Group.
The Group has identified exposure to the following financial risks from its use of financial instruments: capital
management risk, market risk, credit risk and liquidity risk.
Capital Management Risk
The Group's capital consists of long-term borrowings, cash and equity attributable to the shareholders. The Board's policy
is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain the future
development of the business. The Board regularly reviews the Group's capital structure, cost of capital, gearing levels and
other specific measures. From time to time, the Company has purchased its own shares when the Board considered that this
course of action would enhance the value of the Group for shareholders. Since the restructuring in July 2013 dividend
policy has been reviewed half-yearly by the Board. No dividend has been paid during the year. There were no other changes
in the Group's approach to capital management during the year.
Market Risk
Market risk is the risk that changes in market conditions, such as interest rates, foreign exchange rates and equity
prices, will affect the Group's profit or loss and cash flows. The Group's exposure to market risks is restricted to
interest rate risk only. The Group borrows at floating rates of interest and uses financial instruments to fix the floating
rates of interest in accordance with its policy.
The Group does not speculate in financial instruments. They have only been used to limit exposure to interest rate
fluctuations. The Company continues to monitor the interest rate environment, and may enter into some hedging arrangements
in the future. However, given the currently low and stable rates and the Company's sales programme, this would not be
advantageous at present.
At 30 September 2016 At 30 September 2015
Interest Notional Loans not Interest Notional Loans not
bearing value of protected bearing value of protected
loans swaps by swaps loans swaps by swaps
£000 £000 £000 £000 £000 £000
Variable rate loan 50,728 50,728 55,988 53,178 2,810
50,728 - 50,728 55,988 53,178 2,810
Sensitivity Analysis
IFRS 7 requires an illustration of the impact on the Group's financial performance of changes in interest rates. The
following sensitivity analysis has been prepared in accordance with the Group's existing accounting policies and considers
the impact on the Income Statement and on equity of an increase of 100 basis points (1%) in interest rates. As interest
rates were below 1% in the current and previous year, it has not been possible to consider the impact of a decrease of 100
basis points on interest income and expense as it would result in a negative rate of interest. Therefore, the impact of a
fall in interest rates has been restricted to a floor of 0%. It has been possible to consider the impact of a 1% change in
rates on the fair value of derivatives as the contracted rates are greater than 1%. All other variables remain the same and
any consequential tax impact is excluded. The analysis assumes that changes in market interest rates affect the interest
income and interest expense of derivative financial instruments. Changes in the fair value of derivative financial
instruments have been estimated by discounting future cash flows at appropriate market rates prevailing at each year end.
Actual results in the future may differ materially from these assumptions and, as such, these tables should not be
considered as a projection of likely future gains and losses.
2016 2015
Impact on Income Impact on Equity Impact on Income Impact on Equity
Increase Decrease Increase Decrease Increase Decrease Increase Decrease
by 1% to 0% by 1% to 0% by 1% to 0% by 1% to 0%
Impact on interest income and expense in £000s
(398) 228 (398) 228 169 13 169 13
Increase Decrease Increase Decrease
by 1% by 1% by 1% by 1%
Impact on fair value of derivatiives in £000s
- - - - 627 363 627 363
Credit Risk
Credit risk is the risk of financial loss to the Group if a tenant, bank or counterparty to a financial instrument fails to
meet its contractual obligations and arises principally from the Group's receivables from tenants, cash and cash
equivalents held by the Group's banks and derivative financial instruments entered into with the Group's banks.
Trade and Other Receivables
The Group's exposure to credit risk is influenced mainly by the individual characteristics of each tenant. The Group has
over 1,000 tenants in over 300 properties. There is no significant concentration of credit risk due to the large number of
small balances owed by a wide range of tenants who operate across all retail sectors. Geographically there is no
concentration of credit risk in any one area of the UK. An analysis of the business by region, user type and tenant grade
is given in the Operating Review. The level of arrears is monitored monthly by the Group and more frequently on a tenant by
tenant basis by the asset managers.
Cash, Cash Equivalents and Derivative Financial Instruments
Two major UK banks provide the majority of the banking services used by the Group. Financial derivatives were only entered
into with one of these core banks.
The Group's financial assets which are exposed to credit risk are classified as follows and are shown with their fair
value:
30 September 2016
At Available At Amortised Total Carrying
Fair Value For Sale Cost Amount Fair Value
£000 £000 £000 £000 £000
Cash and cash equivalents -- 11,000 -- 11,000 11,000
Trade receivables -- -- 1,086 1,086 1,086
Other receivables -- -- 255 255 255
-- 11,000 1,341 12,341 12,341
30 September 2015
At Available At Amortised Total Carrying
Fair Value For Sale Cost Amount Fair Value
£000 £000 £000 £000 £000
Cash and cash equivalents -- 12,740 -- 12,740 12,740
Trade receivables -- -- 746 746 746
Other receivables -- -- 171 171 171
-- 12,740 917 13,657 13,657
For all classes of financial assets, the carrying amount is a reasonable approximation of fair value.
The ageing of trade receivables is as follows
2016 2015
Total Impairment After Impairment Total Impairment After Impairment
£000 £000 £000 £000 £000 £000
Not yet due 236 236 175 - 175
Past due by one to 30 days 375 375 327 (3) 324
Past due by 30-60 days 235 235 87 (6) 81
Past due by 60-90 days 38 38 27 (12) 15
Past due by 90 days 654 (452) 202 430 (279) 151
1,538 (452) 1,086 1,046 (300) 746
Impairment as percentage of total debt 29.39% 28.68%
Trade receivables that are not impaired are expected to be recovered.
The movement in the trade receivables' impairment allowance during the year was as follows:
2016 2015
£000 £000
Balance at beginning of year 300 189
Impairment loss recognised 270 134
Trade receivables written off (118) (23)
Balance at end of year 452 300
The impairment loss recognised relates to the movement in the Group's assessment of the recoverability of outstanding trade
receivables.
Liquidity Risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group's
approach to managing liquidity risk is to ensure, as far as possible, that it will always have adequate resources to meet
its liabilities when they fall due for both the operational needs of the business and to meet planned future investments.
This position is formally reviewed on a quarterly basis or more frequently should events require it.
The Group's financial liabilities are classified and are shown with their fair value as follows:
30 September 2016
At At Amortised Total Carrying
Fair Value Cost Amount Fair Value
£000 £000 £000 £000
Interest bearing loans and liabilities - 50,542 50,542 50,542
Finance lease liabilities - 567 567 567
Derivative financial instruments - - - -
Trade payables - 110 110 110
Other payables - 180 180 180
Accruals - 684 684 684
- 52,083 52,083 52,083
30 September 2015
At At Total
Fair Value Amortised Carrying Fair Value
Cost Amount -
£000 £000 £000 £000
Interest bearing loans and liabilities - 55,689 55,689 55,689
Finance lease liabilities - 659 659 659
Derivative financial instruments 2,294 - 2,294 2,294
Trade payables - 521 521 521
Other payables - 540 540 540
Accruals - 918 918 918
2,294 58,327 60,621 60,621
For all classes of financial liabilities, the carrying amount is a reasonable approximation of fair value.
The maturity profiles of the Group's financial liabilities are as follows:
30 September 2016
Contractual Within One Two Three Four Over
Carrying Cash One to Two to Three to Four to Five Five
Value Flows Year Years Years Years Years Years
£000 £000 £000 £000 £000 £000 £000 £000
Interest bearing loans and borrowings 50,542 52,884 2,134 50,750
Finance lease liabilities 567 4,108 34 34 34 34 34 3,938
Derivative financial instruments - -
Trade payables 110 110 110
Other payables 180 180 180
Accruals 684 684 684
52,083 57,966 3,142 50,784 34 34 34 3,938
As set out in note 8, the bank loans were restructured in November 2016. If these changes were reflected in the above
table, the first row would be restated as follows:
Contractual Within One Two Three Four Over
Carrying Cash One to Two to Three to Four to Five Five
Value Flows Year Years Years Years Years Years
£000 £000 £000 £000 £000 £000 £000 £000
Interest bearing loans and borrowings 50,542 54,582 10,254 2,007 2,083 40,238
30 September 2015
Contractual Within One Two Three Four Over
Carrying Cash One to Two to Three to Four to Five Five
Value Flows Year Years Years Years Years Years
£000 £000 £000 £000 £000 £000 £000 £000
Interest bearing loans and borrowings 55,689 59,444 2,429 2,542 54,473 - -
Finance lease liabilities 659 4,727 48 48 48 48 48 4,487
Derivative financial instruments 2,294 2,718 2,718 - - - - -
Trade payables 521 521 521 - - - - -
Other payables 540 540 540 - - - - -
Accruals 918 918 918 - - - - -
60,621 68,868 7,174 2,590 54,521 48 48 4,487
Contractual cash flows include the undiscounted committed interest cash flows and, where the amount payable is not fixed,
the amount disclosed is determined by reference to the conditions existing at the year end.
16. Operating Lease Arrangements
a) Leases as Lessee
The Company has no leases where it is a lessee
b) Leases as Lessor
The investment properties are let under operating leases. Future minimum lease payments receivable by the Group under
non-cancellable operating leases are receivable as follows:
2016 2015
£000 £000
Less than one year 1,976 1,907
Between one and five years 2,371 2,519
More than five years 2,709 3,126
7,056 7,552
17. Capital Commitments
At 30 September 2016 the Group had contracted capital expenditure for which no provision has been made in these financial
statements of £52,000 (2015: £24,000).
18. Related Parties
Transactions with Key Management Personnel
The only transactions with key management personnel relate to remuneration which is set out in the Remuneration Report.
The key management personnel of the Group for the purposes of related party disclosures under IAS 24 comprise all executive
and non-executive directors.
See also Note 20: Significant Contracts.
19. Group Entities
All the below companies are incorporated in the United Kingdom and 100% owned at 30 September 2015 and 2016
NOS 4 Limited
NOS 5 Limited
NOS 6 Limited
NOS 7 Limited (formerly Palladium Investments Limited)
Gilfin Property Holdings Limited
20. Significant contracts
With effect from 22 July 2013 the Company entered into a management agreement with Internos Global Investors Limited
("Internos"). Under this agreement the Company pays to Internos:
• An annual management fee of 0.70% of the gross asset value of the portfolio, subject to a minimum fee of £1m in each of
the first two years, £0.95m for the third year and £0.9m for the fourth year.
• An annual performance fee of 20% of the recurring operating profits above a pre-agreed target recurring operating
profit.
• Fees for property sales as follows:
Up to £50m nil
£50m-£150m 0.5% of sales
Over £150m 1.0% of sales
• A terminal fee of 5.7% of cash returned to the Company's shareholders in excess of 36.1 pence per share from the
Effective Date outside of dividend payments (the "Terminal Fee Hurdle"). The Terminal Fee Hurdle rises by 8% per annum
after the first year but reduces on a pro-rata daily basis each time equity is returned to shareholders outside of dividend
payments from recurring operating profits. As at the year end the hurdle stood at 45.5p per share.
Under the terms of the agreement Internos received fees of £0.963m (2015: £1.016m) during the year.
Company Balance Sheet
as at 30 September 2016
2016 2015
Note £000 £000 £000 £000
Fixed assets
Investments C5 27,268 29,754
27,268 29,754
Current assets
Debtors C6 1,234 149
Cash 8,094 7,475
9,328 7,624
Creditors: Amounts falling due within one year C7 (2,508) (582)
Net current liabilities 6,820 7,042
Total assets less current liabilities 34,088 36,796
Creditors: Amounts falling due after one year - -
Net assets 34,088 36,796
Capital and reserves
Share capital C8 18,334 18,334
Reserves C8 3,742 3,742
Capital redemption reserve C8 1,764 1,764
Profit and loss account C8 10,248 12,956
Shareholders' funds 34,088 36,796
These financial statements were approved by the Board of directors on 9 December 2016 and were signed on its behalf by:
Stephen East
Chairman
The registered number of the Company is 05304743.
Notes to the Financial Statements
C1. Accounting Policies
The Local Shopping REIT Plc (the "Company") is a company incorporated and domiciled in the UK.
These financial statements were prepared in accordance with Financial Reporting Standard 102 The Financial Reporting
Standard applicable in the UK and Republic of Ireland ("FRS 102") as issued in August 2014. The amendments to FRS 102
issued in July 2015 and effective immediately have been applied. The presentation currency of these financial statements is
sterling. All amounts in the financial statements have been rounded to the nearest £1,000.
In the transition to FRS 102 from old UK GAAP, the Company has made no measurement and recognition adjustments.
FRS 102 grants certain first-time adoption exemptions from the full requirements of FRS 102. None of these exemptions have
been utilised in the preparation of these financial statements.
The consolidated financial statements of The Local Shopping Reit Plc are prepared in accordance with International
Financial Reporting Standards as adopted by the EU and are available to the public. In these financial statements, the
company is considered to be a qualifying entity (for the purposes of this FRS) and has applied the exemptions available
under FRS 102 in respect of the following disclosures:
· Reconciliation of the number of shares outstanding from the beginning to end of the period;
· Cash Flow Statement and related notes; and
· Key Management Personnel compensation.
· Employee benefits
· Own shares held by Employee Benefit Trust
As the consolidated financial statements include the equivalent disclosures, the Company has also taken the exemptions
under FRS 102 available in respect of the following disclosures:
· Certain disclosures required by FRS 102.26 Share Based Payments; and,
· The disclosures required by FRS 102.11 Basic Financial Instruments and FRS 102.12 Other Financial Instrument Issues
in respect of financial instruments not falling within the fair value accounting rules of Paragraph 36(4) of Schedule 1.
The Company proposes to continue to adopt the reduced disclosure framework of FRS 102 in its next financial statements.
The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in
these financial statements.
There were no judgements made by the directors, in the application of these accounting policies that have significant
effect on the financial statements, neither estimates with a significant risk of material adjustment in the next year.
Measurement convention
The financial statements are prepared on the historical cost basis.
Classification of financial instruments issued by the Company
In accordance with FRS 102.22, financial instruments issued by the Company are treated as equity only to the extent that
they meet the following two conditions:
(a) they include no contractual obligations upon the company to deliver cash or other financial assets or to
exchange financial assets or financial liabilities with another party under conditions that are potentially unfavourable to
the company; and
(b) where the instrument will or may be settled in the company's own equity instruments, it is either a
non-derivative that includes no obligation to deliver a variable number of the company's own equity instruments or is a
derivative that will be settled by the company's exchanging a fixed amount of cash or other financial assets for a fixed
number of its own equity instruments.
To the extent that this definition is not met, the proceeds of issue are classified as a financial liability. Where the
instrument so classified takes the legal form of the company's own shares, the amounts presented in these financial
statements for called up share capital and share premium account exclude amounts in relation to those shares.
Basic financial instruments
Trade and other debtors / creditors
Trade and other creditors are recognised initially at transaction price plus attributable transaction costs. Subsequent to
initial recognition they are measured at historic cost, less any impairment losses in the case of trade debtors. If the
arrangement constitutes a financing transaction, for example if payment is deferred beyond normal business terms, then it
is measured at the present value of future payments discounted at a market rate of instrument for a similar debt
instrument.
Investments in subsidiaries
These are separate financial statements of the company. Investments in subsidiaries are carried at cost less impairment.
Tangible fixed assets
Following the termination of the Company's office lease in 2013, all tangible assets were written off in that year.
Impairment
Financial assets (including trade and other debtors)
A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether
there is objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss
event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the
estimated future cash flows of that asset that can be estimated reliably.
An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its
carrying amount and the present value of the estimated future cash flows discounted at the asset's original effective
interest rate. For financial instruments measured at cost less impairment an impairment is calculated as the difference
between its carrying amount and the best estimate of the amount that the Company would receive for the asset if it were to
be sold at the reporting date. Interest on the impaired asset continues to be recognised through the unwinding of the
discount. Impairment losses are recognised in profit or loss. When a subsequent event causes the amount of impairment loss
to decrease, the decrease in impairment loss is reversed through profit or loss.
Provisions
A provision is recognised in the balance sheet when the Company has a present legal or constructive obligation as a result
of a past event, that can be reliably measured and it is probable that an outflow of economic benefits will be required to
settle the obligation. Provisions are recognised at the best estimate of the amount required to settle the obligation at
the reporting date.
Where the Company enters into financial guarantee contracts to guarantee the indebtedness of other companies within its
group, the company treats the guarantee contract as a contingent liability until such time as it becomes probable that the
company will be required to make a payment under the guarantee.
1.19 Expenses
Interest receivable and Interest payable
Interest payable and similar charges include interest payable, finance charges on shares classified as liabilities and
finance leases recognised in profit or loss using the effective interest method, unwinding of the discount on provisions,
and net foreign exchange losses that are recognised in the profit and loss account.
Taxation
Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the profit and loss account
except to the extent that it relates to items recognised directly in equity or other comprehensive income, in which case it
is recognised directly in equity or other comprehensive income.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted
or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.
Deferred tax is provided on timing differences which arise from the inclusion of income and expenses in tax assessments in
periods different from those in which they are recognised in the financial statements. The following timing differences are
not provided for: differences between accumulated depreciation and tax allowances for the cost of a fixed asset if and when
all conditions for retaining the tax allowances have been met; and differences relating to investments in subsidiaries to
the extent that it is not probable that they will reverse in the foreseeable future and the reporting entity is able to
control the reversal of the timing difference. Deferred tax is not recognised on permanent differences arising because
certain types of income or expense are non-taxable or are disallowable for tax or because certain tax charges or allowances
are greater or smaller than the corresponding income or expense.
Deferred tax is measured at the tax rate that is expected to apply to the reversal of the related difference, using tax
rates enacted or substantively enacted at the balance sheet date. Deferred tax balances are not discounted.
Unrelieved tax losses and other deferred tax assets are recognised only to the extent that is it probable that they will be
recovered against the reversal of deferred tax liabilities or other future taxable profits.
Profit for the Financial Year
The Company has taken advantage of Section 408 of the Companies Act 2006 and has not included its own profit and loss
account in these financial statements. The Company's loss for the year was £2.774m (2015: profit £0.071m)
C2. Remuneration of Directors
The detailed information concerning directors' emoluments, shareholdings and share options is shown in the Remuneration
Report.
All directors of the Company are directors of the Group.
C3. Remuneration of Auditors
The detailed information concerning Auditors' remuneration is shown in note 2 to the Group financial statements.
C4. Staff Numbers, Costs and Share Option Schemes
The detailed information concerning staff numbers, costs and share option schemes is shown in note 2 to the Group financial
statements.
C5. Fixed Asset Investments
Shares in Group
Undertakings Total
£000 £000
Cost
At 30 September 2015 108,605 108,605
Disposals - -
At 30 September 2016 108,605 108,605
Provisions
At 30 September 2015 78,851 78,851
Impairment charge for year 2,486 2,486
Disposals - -
At 30 September 2016 81,337 81,337
Net book value
At 30 September 2016 27,268 27,268
At 30 September 2015 29,754 29,754
An impairment review of the carrying value of the Company's investments in its subsidiary undertakings has been performed.
In carrying out this review, the directors had due regard to the nature of the property investments held, which is
commensurate with the funding arrangements in place. On the basis of this review which included a review of the underlying
assets of the individual subsidiaries the directors have written down the value of investments in subsidiary undertakings
to their estimated realisable value.
The companies in which the Company's interests at the year end were more than 20% are as follows:
Nature of business Ownership interest*
NOS 4 Limited Property investment 100%
NOS 5 Limited Property investment 100%
NOS 6 Limited Property investment 100%
NOS 7 Limited (formerly Palladium Investments
- More to follow, for following part double click ID:nRSL5117RdRecent news on Alina Holdings
See all newsREG-Alina Holdings PLC Alina Holdings PLC: Notice of AGM
AnnouncementREG-Alina Holdings PLC Alina Holdings PLC: Annual Financial Report to 31 December 2024
AnnouncementREG-Alina Holdings PLC Alina Holdings PLC: Equity Placing - Subscription - Related Party Transaction
AnnouncementREG-Alina Holdings PLC Alina Holdings PLC: 2024 Interim Results
AnnouncementREG-Alina Holdings PLC Alina Holdings PLC: Results of AGM
Announcement